Ross Ulbricht was Railroaded for Non-Violent Crimes he Likely did not Commit and Sentenced to Double Life in Prison + 40yrs

Case Overview

Ross Ulbricht was arrested on October 1, 2013 in San Francisco, based on the accusation that he created and operated the anonymous online marketplace Silk Road under the pseudonym Dread Pirate Roberts (DPR). The Silk Road website was an open market with few restrictions and permitted vendors to sell drugs and other illegal goods as well as legal ones, including art, books, raw milk and clothing.  It forbade items that the administration considered victimizing, including child pornography, stolen goods and assassinations.   Nothing but drug sales was allowed to be mentioned before the jury.

Silk Road was hosted on the TOR anonymous network and the means of exchange was exclusively the digital currency bitcoin. In order to use it, one had to open and use a bitcoin account as well as know how to use TOR.

The government cited no victims for any of its charges at trial or for its uncharged, unconvicted, unproven allegations of murder-for-hire that were included in the criminal complaints, indictment and were presented to the jury at trial.

Although it was an extremely complex case, on February 4, 2015 a jury delivered a guilty verdict of seven counts in a mere three hours.

On May 29, Ross was sentenced to five of those counts (#2, 4, 5, 6, 7). Two counts were ultimately removed dueto the duplication of Counts 1 with 2, and also Counts 3 with 4.  However, the jury was told he was guilty of all seven counts. The defense argued that Count 2 should be dismissed as also subsumed within Count 4, but was denied.

Accordingly, Ross was sentenced on the remaining Counts. He received the maximum for each Count, with each to run concurrently to the others:  Count Two (life), Count 4 (life), Count 5 (5 years), Count 6 (15 years) and Count 7 (20 years).   Because of the concurrent nature, this is equivalent to three life sentences.

None of the charges accused Ross of selling an illegal substance; laundering money; hacking into a computer; or selling fake IDs; or directly harming any person or property. Rather the charge is that he created and ran a website that permitted these actions. The charges are all non-violent and Ross has no prior offenses.

Ross now resides at the Metropolitan Correctional Center in Manhattan, New York. He is appealing the trial and sentencing.

The Charges

The charges that the government was required to prove at trial, beyond a reasonable doubt, are:

  1. Count One: Distributing OR aiding and abetting the distribution of narcotics. Aiding and abetting means knowingly assisting in the commission of a crime, even if he didn’t actually commit the crime. Distribution requires a concrete involvement in the transfer of drugs.
  2. Count Two: The distribution of controlled substances intentionally accomplished by means of the Internet.
  3. Count Three: Conspiracy with others to violate narcotics laws. A conspiracy exists if two or more persons, in any manner (whether they verbally agree or not) “come to a common understanding to violate the law.”
  4. Count Four: Engagement in a continuing criminal enterprise (kingpin charge). This requires that the defendant committed a series of federal narcotics offenses with five or more people whom he organized supervised, managed and from whom he received substantial profit. This charge contradicts Count One, as you can’t be an organizer AND just an aider or abettor. In addition the government failed to identify five people who were organized.
  5. Count Five: Conspiring with others to commit OR aid and abet computer hacking. No hacking was proven and no one came forward to say their computer was hacked from software sold on Silk Road.
  6. Count Six: Conspiring with others to traffic in fraudulent identification documents.
  7. Count Seven: Conspiring to commit money laundering.

The Court also imposed forfeiture in the amount of $183,961, 921.  It did not impose restitution because the harm was not quantifiable in terms of money damages.

Pre-Trial

Prosecution or Persecution?

After three delays, Ross Ulbricht’s trial began January 13, 2015. He was subjected to many offenses before he went to trial. He was held in Solitary Confinement, with no explanation, for six weeks. He was deprived of bail despite no previous record, 70 people writing letters vouching for his character and no criminal or personal history of violence or connections to terror or organized crime. The prosecution claimed he was dangerous based on murder-for-hire allegations for which they did not indict him two months later.

Ross had court permission to help his attorneys review six terabytes of discovery evidence (equivalent to 2.5 billion single-spaced, typed pages) but he was not provided with reliable laptop or software for months at a time. The defense was deprived of the witness list until three days before trial (normally they have several weeks), hampering their ability to thoroughly prepare cross examination.

7,500 pages of 3500 material was dumped on the defense only a week before trial, although the prosecution had possessed it for a year. The court ruled about three weeks before that evidence that corrupt agents had been inextricably involved in the Silk Road and stealing from the site could not be known to the jury.

The Politics

In 2011, Chuck Schumer, US Senator from New York, held a press conference calling for the DEA and Department of Justice to “crack down” on Silk Road and use of Bitcoins. It became known as Schumer’s case. In 2013, Ross was arrested in California where he lived but was transferred to Schumer’s home state, New York, for prosecution.

Showing no regard for the presumption of innocence and the Constitution’s due process protections, Schumer wrote US Attorney General Eric Holder an open letter before trial on October 27, 2014: “With your help, the Silk Road was shut down by the Federal Bureau of Investigation (FBI) in 2013, and I am pleased that DOJ is currently prosecuting its operator and holding him accountable.”

In 2014 and 2015, Ross was arraigned and tried before Judge Katherine Forrest, who was recommended to the bench by Senator Schumer in 2011. The lead prosecutor was Preet Bharara, who served as Schumer’s special counsel for several years.

Protestors

Several people were outraged that a website host faced life, and traveled from several states, braving the bitter cold to stand with signs outside the court house. Others handed out pamphlets, educating people about their rights as jurors. The judge asked potential jurors if they had read a pamphlet and, if not, would they promise not to read one. She advised the defense that, if the protestors and pamphleteers were not gone by the next day, she would sequester the jury, an action traditionally reserved for defendants who threaten the jury’s safety. She did not say she would tell the jury this was to protect them from pamphlets. Not willing to prejudice the jury and possibly hurt Ross, the protestors and pamphleteers did not return.

Blocked Defense Witnesses

Bitcoin

Bitcoin, the anonymous, peer-to-peer digital currency used exclusively on Silk Road, was an important issue in the trial. It is a complex system that is beyond the knowledge or understanding of the average person. Since only two of the 12 jurors were under 40, with several retirees, many were ignorant of technical issues, TOR and Bitcoin.

Blocking the bitcoin expert

The government filed a motion to block the defense from bringing world-renowned bitcoin expert and author Andreas Antonopoulos to testify about bitcoin, calling his testimony “irrelevant.” The judge agreed and did not permit him to take the stand saying, “The jury understands bitcoin just fine, so his testimony would be irrelevant and unnecessary.”

Yet the government was permitted to bring former FBI Silk Road investigator, Ilhwan Yum of FTI Consulting as a witness mid-trial. This testimony cost taxpayers $55,000. As happened throughout the trial, the bitcoin exhibit was presented to the defense with improper notice, allowing no time to prepare. Joshua Dratel asked the court for a couple of hours to review the voluminous and complex exhibit before cross examination of the witness, but
was denied.

Interesting note: FTI Consulting also employs FBI agent Christopher Tarbell, the lead Silk Road investigator oddly missing from the trial.

No computer expert either

After the court heard voluminous testimony from the government about technical issues, the defense called Steven Bellovin, a computer networking and security expert from Columbia University. Bellovin would have revealed to the jury the flaws in the government’s laptop investigation. He could have explained many technical issues, including the
lack of security of open ports; how timestamps can be changed; and why complex technology behind hidden websites makes it almost impossible to prove anything.

Like Antonopoulos, Bellovin was not allowed to take the stand. The judge justified this decision by saying that the case did not require specialized technical knowledge.

Government Narrative

Controlled Narrative

What the jury heard was very controlled.

To serve this narrative, in addition to adding uncharged crimes, much was kept out. Anything that cast doubt on the government portrait that Ross was the only DPR, a ruthless kingpin motivated by money, who would do anything to protect his empire, was erased.

For example, the defense moved to admit a statement made to prosecutors by Andrew Jones, the former Silk Road administrator called Inigo. The statement supported the defense theory that there had been multiple people acting as DPR and the identity of DPR had changed in September 2013, shortly before Ross’s arrest. It was that Inigo and DPR agreed upon a prompt so they could be certain they were actually speaking to each other. After all, everyone on Silk Road used assumed identities, everything was anonymous. Yet when Inigo later presented the prompt, “DPR” didn’t know it.

The prosecutors fought having even this simple fact presented to the jury, and the judge agreed.

In addition, the jury was not to know:

  • The legal items sold on Silk Road, or even that there were any.
  • Ross’ peaceful, libertarian views.
  • Chrstopher Tarbell’s testimony.  He was the lead investigator, signed the criminal complaint, lead the arrest team and claims he located the server (a claim widely debunked by experts). Yet Tarbell was barely mentioned at trial. Consequently the defense did not have the opportunity to cross examine him about the server or his investigation.
  • That Ross has a family who loves him. He was forbidden to turn around in the courtroom and smile at us while the jury was present.

Blocked Cross Examination

Surprise admission Day One

Joshua Dratel, the defense attorney, opened by saying that Ross did start Silk Road as an open market, economic experiment, but passed it on to someone else (who took the pseudonym Dread Pirate Roberts, or DPR) and got out. Later, Dratel said, DPR learned that law enforcement was closing in on him and set Ross up to take the blame.  According to the defense, this theory is supported by 5,000 pages of material submitted to the defense by the
government ten days before trial .

Government evidence shows that this DPR paid for, and had a file full of, information about law enforcement investigations; that by September 13, 2013, two weeks before Ross’ arrest, he was warned that they had his real name. The defense asserted that he then implemented his escape plan and transferred the blame to Ross.

Day 3 vs. Day 4

This announcement was based on the government’s own evidence. Until two weeks before Ross’ arrest, the government believed DPR to be Mark Karpeles. a sophisticated computer systems developer who, according to Homeland Security Special agent Jared Der-Yeghiayan, operated multiple different websites. He also ran the failed Mt.Gox bitcoin exchange.

Der-Yeghiayan had spent two years and thousands of hours, under many aliases, on Silk Road and became a trusted moderator called cirrus. He actually helped run the Silk Road. Ultimately, the court banned any questioning of Der-Yeghiayan regarding his strongly held belief, asserted in sworn affidavits and under oath at trial, that Karpeles was DPR. He also testified that more than one person used the DPR identity. [Note: This was later supported,
post trial, by evidence discovered in a buried file in the discovery].

Until Ross’ arrest Der-Yeghiayan had never heard of him. Rather, he testified that for two years he had built a substantial case implicating Karpeles.  Der-Yeghiayan had worked long and hard on this investigation and he testified that he asked other law enforcement agents to not do anything to tip off Karpeles that he was closing in on him.

Competition

According to the defense, there was a lot competition among the agencies to be the one who nabbed DPR. There was intense pressure to make an arrest soon. The government already had controlled the servers for three months, keeping the site open for business, with no arrest. This looked bad, not to mention they had a US senator breathing down their necks. According to the defense, when you have that kind of pressure cooker and competition, the
goal is to be the first to get the prize.

Mystery meeting

Der-Yeghiayan testified that his investigation into Karpeles was sabotaged by another agency, DHS Baltimore, where the corrupt agents Force and Bridges operated. Despite his request not to alert him, this agency did alert Karpeles by seizing $2.9 million from his account. Der-Yeghiayan felt undermined and he recorded this in a detailed chronology of the investigation.

In July, 2013 the same Baltimore agency met with Karpeles’ lawyers, despite Der-Yeghiayan’s asking them not to.  According to Der-Yeghiayan’s testimony, at this meeting Karpeles’ lawyers offered DHS a deal: You back off our client and he’ll give you DPR’s name. It is not known what else transpired at this meeting. We do know that two weeks later Ross was arrested and Karpeles, the government’s prime suspect, was not charged with financial crimes. Der-Yeghiayan apparently wasn’t convinced, however. He continued to investigate Karpeles for weeks after Ross’ arrest.

Prosecution seeks to block testimony

At this point in the questioning the prosecution began strongly objecting, saying the testimony must stop. The defense objected that he had a right to continue, citing the Brady Rule that says that if a prosecutor suppresses evidence favorable to a defendant it violates the Due Process clause of the Constitution. At that time, the judge agreed.

The prosecutor, Serrin Turner, protested that the defense was arguing that someone else was the real DPR. The judge responded that this was a valid approach. Then Turner said that he hadn’t had the chance to talk with the witness about it. The judge responded that he couldn’t talk to the witness about it while an examination was pending. Finally, instead of ruling at a sidebar, the judge sent the jury home an hour early “in the interest of justice.”

Testimony highly relevant

When the jury left, the judge went on to say that if the agent pursued someone other than the defendant, it was not only “highly relevant” but “directly relevant.” How he arrived at that conclusion is “obviously relevant.” That the agent believed there was probable cause was “clearly relevant.” That an agent believed that somebody else might be DPR is “obviously highly relevant.” In fact she said an alternate suspect “strikes me as in the “heartland of the defense.” She then said that the fact that Karpeles could be a DPR, had “come out in spades.”  At a sidebar that day, the testimony was ruled appropriate.

When the prosecution persisted in arguing she said, regarding the Karpeles revelations, “That cat’s out of the bag.” Court adjourned for a long weekend.

Cat back in the bag

When trial commenced the following Tuesday, Jan. 20, the court reversed its opinion and was playing by different rules. The Court refused to allow questioning of Jared Der-Yeghiayan regarding his belief that Karpeles might be DPR. This, Dratel insists, goes precisely to Ross’s defense of raising reasonable doubt that Ulbricht was DPR during the time of the investigation.

Instead Der-Yeghiayan’s thoughts and beliefs were deemed irrelevant – not “highly relevant” as they were the previous week.  Key parts of his testimony were stricken from the record and the jury was instructed to disregard most of what they had heard. It also couldn’t be used in the defense’s all important summation.

The judge also flagged where the prosecutors should have objected and sustained those objections retroactively. The court refused the defense even a brief adjournment to reconstruct its cross-examination to address this radical change.

Defense muzzled

Very strict boundaries were set going forward. Such questions as: “Did you suspect Mark Karpeles” was off limits, as was asking “Did you believe Mark Karpeles was DPR? Do you suspect that Mark Karpeles operated Silk Road?” And the defense was not allowed to question the witness regarding the offer by Karpeles’ lawyers to provide DPR’s name in exchange for not pursuing their client.

For this turn around, the judge offered the justification that the idea of an “alternative perpetrator” might confuse the jury. Basically the government argued that its own witness, even in sworn affidavits, was unreliable and the defense couldn’t use the sworn testimony of a federal agent from the government’s own evidence.

Now, instead of a wide field of evidence being available for cross examination, the defense was tethered to the very narrow path forged by the prosecution’s narrative, and not allowed to deviate from it. It was not permitted to convince the jury of reasonable doubt that Ross was DPR.

“Cross examination is supposed to be generally unfettered in order to explore context, to go out into that field, to get underneath the surface of the direct questioning. Yes, there are limitations, but this was an exceptionally short leash, restricted to that path. And so going forward, with every witness throughout trial, the defense was tethered,” Dratel explained. He stated, “My defense has been eviscerated. “ Or, as Forbes put it, “completely derailed.”

Technical and Forensic Witnesses

Computer Specialist Thomas Kiernan, and other government agents, testified regarding technical and forensic computer matters. Through these witnesses the government admitted to evidence Ulbricht’s laptop and items from its hard drive. Later computer forensics agent Christopher Beeson testified that, because the laptop was encrypted, he couldn’t turn it off to image or copy it. This may have modified or damaged the data. He also admitted he had not followed investigative guidelines.

Despite this and many more questions about the laptop and broken protocol, when defense counsel attempted to cross-examine these witnesses, the Court repeatedly curtailed or flatly denied the cross examination, even stating at one point in the jury’s presence, “[y]ou can put somebody else on the stand to do that[,]” thus improperly placing the burden of proof on the defense.

Conclusion

“In a case in which lack of integrity of digital information, created and transmitted on an anonymous untraceable internet network, was of paramount importance; and in which the government did not produce a single witness to testify firsthand that Ulbricht authored any of the communications attributable to DPR; and which was permeated by corruption of two law enforcement agents participating in the investigation;  the restrictions on cross-examination and preclusion of expert witnesses (that were) offered to overcome those restrictions, eviscerated Ulbricht’s defense and denied him a fair trial.” Ross Ulbricht appeal brief, p. 7

Continued on next page…

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